Egypt saw its highest inflation rate in almost two and a half years in April, and analysts expect it to remain high throughout 2022. As the country wrestles with the global turmoil of the Russia-Ukraine war and lingering global supply chain disruptions, the Central Bank of Egypt (CBE) is trying to find the right balance of interest rates to contain the spiraling prices.
The Monetary Policy Committee (MPC) of the CBE decided on May 19 to raise interest rates for the second time since March by 200 basis points, bringing the overnight deposit rate, overnight lending rate, and the rate of the main operation to 11.25%, 12.25%, 11.75%, respectively. The discount rate was also raised to reach 11.75%.
This decision comes as inflation continues to accelerate and rising global rates put pressure on portfolio flows.
“Global economic activity has slowed down due to ongoing tensions between Russia and Ukraine. Trade sanctions imposed on Russia and corresponding supply-chain bottlenecks have elevated global commodity prices, such as international prices for oil and wheat, with the latter’s global supply also impacted by adverse weather conditions and poor harvests in select regions,” the CBE statement said.
Reporting and video production by Nour Eltigani.